Coordinated controls in fight against Norway’s shadow economy

In Norway staff from six different authorities have gathered in joint offices in Oslo, Bergen and Stavanger to fight the shadow economy. Building sites and other workplaces have been targeted in coordinated operations by 120 investigators. The results have been good so far. The operations run alongside campaigns against undeclared work and have had broad media coverage.

“There are several advantages to working together this closely. We can coordinate the information we get from different registers, and we get access to more resources. We can make an analysis based on registers and experiences and we can also ask for further information,” says Pål H. Lund, head of department at the Norwegian Labour Inspection Authority, one of five control bodies working with police. The others are regional and municipal tax offices, the customs and The Norwegian Labour and Welfare Administration (NAV). Oslo’s new centre was opened in February this year. The 19 people who work there will carry out four major operations every year.

The government has provided a lot of backing in the fight against the black market. Here Prime Minister Erna Solberg and Minister of Labour Robert Eriksson (left) are being briefed by Pål H. Lund and Terje Ruud (right)

“We work both with big professional businesses and the part of the market which targets private individuals. In Oslo we mainly concentrate on trying to uncover those behind undeclared work in the professional market, the ones making the big money,” says Pål H. Lund.

“In Bergen and Stavanger they concentrate more on private individuals providing or purchasing undeclared labour.”

The Labour Inspection Authority’s most important task in this cooperation is to focus on working conditions.

“We check whether workers are paid what they are due and that they get overtime pay according to regulations. We check health and safety provisions and whether living quarters are adequate. It’s all in cooperation with the social partners and with the serious players in each trade.”

430 businesses controlled

During the first major control 430 businesses on various construction sites were investigated. Information was gathered on 1,200 individuals, 150 of them were thoroughly controlled. It turned out 20 of them were not registered to pay tax and four people who were illegally in the country were expelled. In 16 cases the work sites were closed down because of health and safety breaches, 10 million kroner (€1.05m) in unpaid fees and taxes were discovered and 20 businesses were found not to be VAT registered.

“The control disclosed a range of criminal circumstances and breaches of regulations. Several of these cases are also being investigated further, so this could become even more wide ranging. I have been working for the Labour Inspection Authority for 16 years and find this way of working both rewarding and exciting, since our efforts bring major results,” says Pål H. Lund.

The construction trade, cleaning trade and restaurants are among the sectors known to be involved in the shadow economy. But there have been controls of agriculture, fisheries and companies like car washes.

“If you pay 150 kroner (€15) to clean your car and four people start working on it simultaneously, something is not right,” says Pål H. Lund.

Hard to map the extent of the problem

Mapping the extent of the shadow economy is one of the 22 points presented by the Norwegian government in January as part of its strategy against the shadow economy. According to the Agenda think tank Norwegian private individuals purchase cleaning services to the tune of six million undeclared working hours every year. That equals 3,400 full time jobs just in the cleaning trade. The extent of this is now so vast that it is nearly impossible for serious players to stay competitive. Norway has no ROT or RUT deductions, tax rebates given in Finland and Sweden for repairs and maintenance of private houses and for various kinds of household work, like cleaning.

Agenda is not affiliated with any political party, but partly finance by the Norwegian Confederation of Trade Unions (LO). The think tank’s report on the shadow economy advices against Norway copying the ROT and RUT deductions because of the many problematic issues linked with the model.

“The model is too administration heavy and costly and its effect is unclear and could open up for new kinds of cheating. It also has unfortunate distribution aspects in that it benefits households with relatively high incomes,” the think tank writes.

So for now increased controls will remain Norway’s most important tool in the fight against the shadow economy.

“Nobody should feel safe that their workplace is not on the list of the Labour Inspection Authority and other control agencies. A national whistleblowing telephone line has also been set up allowing people to speak up about issues,” says Pål H.Lund.

“It is important that society tackles this kind of crime. In the long run it could undermine the welfare state and conditions in working life. People using undeclared work and other kinds of crime to gain a competitive advantage on those who follow the rules — for instance by not using scaffolding to protect workers. As a result they can also put at risk workplaces which are being run in a legal manner — and this could lead to accidents which should be avoidable.”